Hi all,
My company made me sign a new document that listed a few companies which I cannot join until 6 months from the date of leaving the current organization. When I joined this organization, this clause was not present in my appointment letter; it was introduced later, and they made all the employees sign the contract. The document was not on any stamp paper; it was on the company letterhead.
Now I am looking for a change, and most of the companies I want to join are part of that list. Please advise if I can go ahead and apply to these competitors.
From India, Bengaluru
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1My company made me sign a new document that listed a few companies which I cannot join until 6 months from the date of leaving the current organization. When I joined this organization, this clause was not present in my appointment letter; it was introduced later, and they made all the employees sign the contract. The document was not on any stamp paper; it was on the company letterhead.
Now I am looking for a change, and most of the companies I want to join are part of that list. Please advise if I can go ahead and apply to these competitors.
From India, Bengaluru
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You have signed an agreement containing a non-competition clause. It doesn't matter that it was on the letterhead of the company. Therefore, you would be breaching the agreement if you were to join any of the listed firms. Perhaps you could consider joining another firm for a short period and then try your luck with any of the listed ones.
From India, Mumbai
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From India, Mumbai
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I disagree with KK!HR on this point.
A Non-Compete agreement made for an employee, barring him from joining competing companies, has no validity in Indian Jurisprudence. The agreement will not be upheld in any court of law in India. You cannot prevent an employee from exercising his right to employment.
The only time a non-compete agreement will be valid is when the person sold his company and got paid for goodwill for the same. For a normal employee, it is invalid and illegal.
However, you should remember that the company has money to pay lawyers and drag the matter in courts for a long time. You will have to be ready to spend money on lawyers, and also your new employer will be unhappy that your attention is diverted from normal employment by the court case.
Be sure to discuss the matter with the HR of the new employer well in advance.
From India, Mumbai
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A Non-Compete agreement made for an employee, barring him from joining competing companies, has no validity in Indian Jurisprudence. The agreement will not be upheld in any court of law in India. You cannot prevent an employee from exercising his right to employment.
The only time a non-compete agreement will be valid is when the person sold his company and got paid for goodwill for the same. For a normal employee, it is invalid and illegal.
However, you should remember that the company has money to pay lawyers and drag the matter in courts for a long time. You will have to be ready to spend money on lawyers, and also your new employer will be unhappy that your attention is diverted from normal employment by the court case.
Be sure to discuss the matter with the HR of the new employer well in advance.
From India, Mumbai
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A non-competition clause or non-compete clause in an employment agreement is a clause by which an employee agrees not to work with a rival company or not to start a similar business or profession on his own during a specified period after leaving his current employer.
The operation of the non-compete clause is of two phases: (1) during the period of employment and (2) post-termination of employment.
However, the Indian Judiciary has divergent views on the legality of such a clause.
The enforceability of the non-compete clause is vehemently opposed by certain jurists under the main provision of Section 27 of the Indian Contract Act, 1972, which declares that every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is void to that extent. The jurists who are against this proposition derive support from the exception clause of the same Section 27 of the Act. In India, the higher judiciary has held that the non-compete clause post-termination of employment is void ab initio as it curtails one's fundamental right to earn his livelihood through a lawful means and as such, it is opposed to public policy. In some other cases, the higher Judiciary has held that such a negative clause can be justified in the backdrop of confidentiality of modern business strategies combined with the integrity of the persons employed therein.
In Superintendence Company of India Pvt Ltd v. Krishan Murugai, the Honorable Supreme Court of India held that a contract which has an object of restraining trade is prima facie void. It was also observed by the Apex Court that even if the restrictive covenant was to include cessation of employment at the volition of the employee, there could be no post-employment restriction under Section 27 of the Contract Act. Again in the year 2006, the two-Judge Bench of the Supreme Court refused enforcement of a post-employment restriction on the same ground of Section 27 of the Indian Contract Act, 1872 in Percept D'Mart India (P) Ltd v. Zaheer Khan and Others.
However, in V.F.S Global Services v. Mr. Suprit Roy, the Bombay High Court held that a restriction on the use of trade or business secrets during or after the termination of employment does not constitute a "restraint on trade" under Section 27 of the Contract Act, 1872, and can thus be enforced in certain situations. Besides, in Niranjan Shankar Golikari v. the Century Spinning and Manufacturing Company Ltd, the Supreme Court held that restraints or negative covenants in the appointment or contracts may be legal if they are justified. The ratio decidendi of these judgments reflect the conviction of the higher Judiciary that the validity of the non-compete clause in an employment contract can be tested on the anvil of protection of confidentiality of an organization and its proprietary rights of patents and trademarks.
Juxtaposing the above two sets of views of the higher judiciary, we can conclude that a non-compete clause operative during the course of employment is legally sustainable but after cessation of employment, its maintainability is dependent on reasonable factors such as the position held by the employee, the limits of time and distance of debarment, compensation, if any payable under the contract for the compulsory period of unemployment, trade secrets, etc.
Of course, the response of Mr. KK!HR is one arising out of practical wisdom because the post-termination ban period of reemployment with certain specified competitor companies seems reasonable. Since the poster has stated that such an agreement was obtained from him after his joining, he can fight the case if he has the wherewithal and patience after taking the prospective employer into confidence as suggested by Mr. Banerjee.
From India, Salem
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The operation of the non-compete clause is of two phases: (1) during the period of employment and (2) post-termination of employment.
However, the Indian Judiciary has divergent views on the legality of such a clause.
The enforceability of the non-compete clause is vehemently opposed by certain jurists under the main provision of Section 27 of the Indian Contract Act, 1972, which declares that every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is void to that extent. The jurists who are against this proposition derive support from the exception clause of the same Section 27 of the Act. In India, the higher judiciary has held that the non-compete clause post-termination of employment is void ab initio as it curtails one's fundamental right to earn his livelihood through a lawful means and as such, it is opposed to public policy. In some other cases, the higher Judiciary has held that such a negative clause can be justified in the backdrop of confidentiality of modern business strategies combined with the integrity of the persons employed therein.
In Superintendence Company of India Pvt Ltd v. Krishan Murugai, the Honorable Supreme Court of India held that a contract which has an object of restraining trade is prima facie void. It was also observed by the Apex Court that even if the restrictive covenant was to include cessation of employment at the volition of the employee, there could be no post-employment restriction under Section 27 of the Contract Act. Again in the year 2006, the two-Judge Bench of the Supreme Court refused enforcement of a post-employment restriction on the same ground of Section 27 of the Indian Contract Act, 1872 in Percept D'Mart India (P) Ltd v. Zaheer Khan and Others.
However, in V.F.S Global Services v. Mr. Suprit Roy, the Bombay High Court held that a restriction on the use of trade or business secrets during or after the termination of employment does not constitute a "restraint on trade" under Section 27 of the Contract Act, 1872, and can thus be enforced in certain situations. Besides, in Niranjan Shankar Golikari v. the Century Spinning and Manufacturing Company Ltd, the Supreme Court held that restraints or negative covenants in the appointment or contracts may be legal if they are justified. The ratio decidendi of these judgments reflect the conviction of the higher Judiciary that the validity of the non-compete clause in an employment contract can be tested on the anvil of protection of confidentiality of an organization and its proprietary rights of patents and trademarks.
Juxtaposing the above two sets of views of the higher judiciary, we can conclude that a non-compete clause operative during the course of employment is legally sustainable but after cessation of employment, its maintainability is dependent on reasonable factors such as the position held by the employee, the limits of time and distance of debarment, compensation, if any payable under the contract for the compulsory period of unemployment, trade secrets, etc.
Of course, the response of Mr. KK!HR is one arising out of practical wisdom because the post-termination ban period of reemployment with certain specified competitor companies seems reasonable. Since the poster has stated that such an agreement was obtained from him after his joining, he can fight the case if he has the wherewithal and patience after taking the prospective employer into confidence as suggested by Mr. Banerjee.
From India, Salem
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Dear Ashish,
The posts of this kind keep on appearing periodically. Anyway, check my following post on the ruling by the Delhi High Court:
https://www.citehr.com/571397-delhi-...n-compete.html
Thanks,
Dinesh Divekar
From India, Bangalore
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The posts of this kind keep on appearing periodically. Anyway, check my following post on the ruling by the Delhi High Court:
https://www.citehr.com/571397-delhi-...n-compete.html
Thanks,
Dinesh Divekar
From India, Bangalore
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Non-compete clause in service contracts.pdf
Non-compete Clause of Infy.jpg